Legendary billionaire investor Stanley Druckenmiller said the stock market is expected to remain stable over the next ten years. “There’s a high probability in my mind that the market, at best, will be pretty flat for 10 years, much like that period from 1966 to 1982,” Druckenmiller said in an interview with Alex Karp, CEO of Palantir, a software and artificial intelligence company on September 13. Rising inflation, rising interest rates, the ongoing war between Ukraine and Russia and the reversal of globalization, he says, are likely to cause a global recession in the next decade.
Harder than ever for Stanley Druckenmiller to predict what will happen next year
Druckenmiller said it’s harder than ever for him to forecast how the market might behave over the next six months to a year due to the war, the pandemic and the reaction of nations. “Between the pandemic and the war, and the crazy political response, in the United States and around the world, this is the most difficult environment to predict that I have encountered,” he said. The factors that have created bull markets since 1982, and especially over the past decade, have not only stalled but reversed, he added.
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“I love the dark”: Stanley Druckenmiller
However, there can be an advantage to the static environment created by a flat stock market. “The good thing is that there were companies that were doing very well in that environment at the time,” he said, referring to the period of stock market stagnation between 1966 and 1982. “That’s when Apple Computer was founded, Home Depot was founded,” he added. Druckenmiller also warned investors of his bleak outlook, citing his bearish bias, and said it was the hardest time in economic history to forecast. “I had a bearish bias for 45 years and it had to work out, I like the dark,” he said.
Central banks are “reformed smokers”
Globalization, says Druckenmiller, leads to increased worker productivity and disinflation. However, rising tensions between the United States and China and the war in Ukraine have contributed to the reversal of globalization. In addition, central banks that adopted relatively loose monetary policies following the 2008 global financial crisis have begun to tighten them. This is evident in interest rate hikes by central banks around the world. “The response after the global financial crisis to disinflation was zero rates, and lots of money printing, quantitative easing. It created an asset bubble in everything,” he added.
Today, central banks are turning away from these policies. “Now they’re like reformed smokers,” Druckenmiller said of central banks. “They went from feeling like a bunch of money, like driving a Porsche at 200 miles an hour, not just taking your foot off the accelerator, but just hitting the brakes,” a- he added.
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Druckenmiller, who is worth $10.1 billion, ran his hedge fund, Duquesne Capital from 1981 until 2010, when he converted it into a family office. The fund has posted average annual returns of around 30%. He also managed the money of George Soros, senior portfolio manager at Quantum Fund, from 1988 to 2000. He is known for shorting the British pound in 1992, making over $1 billion in profits.